Asia stocks extend market rout on inflation and growth fears; STI down 1.4%

BANGKOK (BLOOMBERG) – A slump in stocks extended into Asia on Thursday (May 19) and US equity futures retreated after mounting fears of an economic downturn hit Wall Street shares and spurred a flight to havens including sovereign bonds.

Japan's Nikkei index lost 2.5 per cent, Australia's S&P/ASX 200 fell 1.9 per cent and South Korea's Kospi index shed 1.8 per cent.

Singapore stocks tumbled on opening, with the Straits Times Index down 1.4 per cent at 9.04am local time.

S&P 500 futures dropped 0.4 per cent while Nasdaq 100 futures slipped 0.7 per cent.

On Wednesday, the S&P 500 index plunged 4 per cent, the biggest daily drop in almost two years, and a more than 5 per cent tumble in the technology-heavy Nasdaq 100 index.

Earnings reports from consumer stalwarts stoked worries that high inflation is weighing on margins and consumer spending. Target Corp plunged the most since Black Monday in 1987, a day after Walmart also spiralled lower.

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United States Federal Reserve officials reaffirmed that sharply tighter monetary policy lies ahead to cool economic activity and get price pressures under control.

Chicago Fed president Charles Evans said raising interest rates somewhat above the neutral level and stopping there should help bring inflation down.

Treasuries climbed amid fraying risk appetite. The US dollar pared an advance. Bonds in Australia and New Zealand jumped in the slipstream of the US session.

China's Covid-19 lockdowns amid a persistent Omicron outbreak are also buffeting markets. Oil sank below $109 a barrel on concerns about demand.

The challenge from inflation for bellwether retailers weakens the argument that corporate earnings can help stem this year's rout in stocks. Instead, global equities are sliding toward a bear market as recession fears mount.

"We are pricing in a growth scare," RBC Capital Markets' Lori Calvasina told Bloomberg TV. "The market is trying to find a bottom here. There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it's going to be another near-death experience."

In other company news, Cisco Systems slid in extended trading on a disappointing revenue outlook.

Tencent Holdings warned it will take time for Beijing to act on promises to prop up the Chinese tech sector.

Premier Li Keqiang said China has enough policy room to deal with the growing challenges facing the economy. A gauge of Chinese shares traded in the US retreated.

Meanwhile, Treasury Secretary Janet Yellen confirmed it is unlikely the US will allow Russia to continue making bond payments on its foreign-currency debt, as investors have had time to adjust to Moscow's exclusion from the global financial system for the war in Ukraine.

Artmotion Asia

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